Gold, Mining ETFs Flirt Dangerously With Key Support Areas

Commodity ETFs News:

The SPDR Gold Shares (NYSEArca: GLD) is trading slightly higher Monday, perhaps a sign that the ongoing U.S. government is restoring gold’s safe-haven status, if only for a day.

Gold bugs need the help. While GLD is down just 1.3% over the past three months, since its late August peak, the ETF has plunged 9.1%. Last Friday, gold touched a three-month low, confirming that it will take a late-year turnaround of epic proportions for the yellow metal to close higher on an annual basis for a 13th consecutive year. [Gold Hits Three-Month Low, Inverse Mining ETF Loving It]

Gold’s technical outlook is growing increasingly worrisome. The $1,300 per ounce level, which has been violated, was viewed not only as psychologically important but also as an area where some gold miners could be inclined to pare production in a bid to conserve cash. [Mining ETFs Vulnerable as Gold Prices Drop]

Adding to the potential for further technical woes for GLD and mining ETFs like the Market Vectors Gold Miners ETF (NYSEArca: GDX) is the fact that gold futures and the PHLX Gold/Silver Index (XAU) are flirting with critical 10-year support levels, according to Chris Kimble of Kimble Charting Solutions.

Further declines for gold futures could mean the near-term downside target is $1,250 an ounce, which could be seen this week if policymakers reopen the government and reach a debt ceiling agreement. Making bullion all the more vulnerable is that it has not been a reliable safe-haven in an environment well-suited for gold upside.

Trading around 87, the Gold/Silver Index, which is not the underlying index for GDX, is trading mere pennies away from its 10-year low notched in July.

Gold ETFs, both mining and physically-backed funds, do not appear to be buy-and-hold investments at the moment. Not when better pricing could avail itself. Goldman Sachs and Morgan Stanley are among the major global banks that have recently sound bearish tones on bullion. Last month, Bank of America Merrill Lynch slashed its 2014 forecast on gold by 17.2% to $1,294 an ounce. Prior to that, Citigroup said it sees gold averaging $1,250 an ounce next year. [More Pain for Gold ETFs]

SPDR Gold Shares

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.